What happens when an investment boom starts solving the shortages that created its biggest winners? Baillie Gifford explores the opportunities for the Monks Investment Trust within and beyond AI

As with any investment, your capital is at risk. Past performance is not a guide to future returns.

One trillion dollars is an incredible incentive. That is roughly what four large US technology companies in your portfolio – Amazon, Alphabet, Microsoft and Meta – are expected to spend next year, the majority on building the infrastructure AI runs on.

Little wonder the market is obsessed. The AI spend is expected to be the second-biggest investment boom in US history as a share of gross domestic product (GDP), and is already dominating and distorting markets.

Over the past 12 months, Monks has both benefited and suffered from this backdrop. It delivered a share price return of 11.9 percent and net asset value return of 10.3 percent. Both returns trailed the 20.9 percent gains of the Trust’s FTSE World benchmark, in part due to different AI exposures, as we explained last quarter.

This quarter, we’ve spent time refining our thinking to answer the most important question for the Trust today: how can Monks benefit from growth on this scale without becoming hostage to a single theme?

Demand for AI is real and expanding

We are taking the demand seriously because it is clearly outpacing supply.

Revenue from Microsoft’s cloud computing business, Azure, and other cloud services grew 43 percent year-over-year last quarter, and its backlog of customer orders alone is large enough to cover the NHS England’s entire budget for three years.

Amazon expects to spend $220bn in cash capital expenditure this year, and even then, it can’t meet demand over the next two years. Its chief executive, Andy Jassy, described the demand already visible for 2028 as “striking” in the July 2026 earnings call.

Those demand drivers are strengthening further. AI agents, the autonomous helpers you can set to work around the clock, have already overtaken human use and are expanding rapidly. That is despite the Cisco president, Jeetu Patel, noting that less than 2 percent of humanity uses agents today.

The big spenders can afford to spend even more. The four giants remain far less indebted than their peers in the global market, and funding sources are diversifying beyond these companies. The demand is there and so is the capacity to keep investing.

Tomorrow’s winners, not yesterday’s

We are also thinking through the implications for companies when the supply response to that incredible demand actually arrives. High returns are attracting extraordinary amounts of capital to chips, memory and datacentres, creating new capacity.

So far, the biggest winners have been suppliers addressing the most severe bottlenecks. But many of those chokepoints may be relatively easy to fix, and the exceptional returns they have generated may not last.

We’re positioning Monks around the winners of the next five years, not the past few. As we mentioned in July, Monks’ core AI exposure is built around companies we see as durable building blocks of the system, not simply beneficiaries of today’s shortage. These include NVIDIA, Taiwan Semiconductor Manufacturing Company (TSMC) and Amazon.

But around this core, Monks has moved more towards companies helping to ease capacity constraints. We added to four semiconductor equipment companies this quarter, including Disco, whose equipment grinds and polishes wafers, and Kokusai, whose machines deposit the layers used in memory chips, as they are dominant at critical steps in the manufacturing process.

As the technology evolves, new constraints are emerging. Monks added two companies that solve those issues this quarter: Astera Labs and SoftBank.

Astera’s connectivity chips move data between expensive AI chips to ensure they don’t sit idle. As agents become a larger share of AI use, logic chips that can coordinate and direct their actions become increasingly important.

SoftBank’s investment in Arm, a logic chip designer, alongside other investments in the AI ecosystem, gives us undervalued exposure to this trend and others.

Protecting the portfolio’s breadth

We are ensuring Monks’ growth is not dominated by AI. We do not want to become an AI infrastructure trust.

This quarter, we’ve added more companies whose growth is not driven by AI. That includes banks benefiting from higher rates and lighter regulation (Texas-based Cullen/Frost) and energy companies profiting from tight supply (Cheniere Energy).

We also took part in the initial public offering (IPO) of Bending Spoons, an Italian company that buys established software businesses and makes them far more efficient and profitable.

We sold WillScot, the modular workspace and storage container provider, and Stella-Jones, the utility pole maker, because we saw little evidence that either would be able to raise prices.

This breadth of growth drivers is becoming more visible in a less AI-dominated list of contributors to quarterly performance. Contributors included The Schiehallion Fund (listed investment trust focused on later-stage private businesses), Petrobras (Brazilian oil giant) and Thermo Fisher (medical equipment). Detractors CATL (batteries), SpaceX (rockets) and AppLovin (in-game advertising).

Whatever happens to the AI investment boom or pace of adoption, a broad and balanced range of growth drivers remains central to Monks’ approach.

Growth that endures

Recent relative underperformance obscures strong profit growth among the portfolio companies. Over the past year, the Monk’s portfolio delivered more than 30 percent profit growth, compared with 25 percent for the index, at higher margins and return on capital. Yet still, the valuation of the Monks’ portfolio relative to the index remains near 10-year lows.

One trillion dollars is an incredible incentive, and it is inevitably shaping markets. We are setting up the portfolio to benefit if the boom continues, capture new opportunities as they emerge, and take advantage of growth beyond AI.

That means more growth drivers and selective exposure to AI, so we are not hostage to it. The backdrop has been difficult, but we’re confident this remains the best approach to grow our shareholders’ returns over the long term.

The Monks Investment Trust plc

Annual discrete performance to 30 September (%)

Past performance is not a guide to future returns.

FTSE index data 

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Important information    

This communication was produced and approved in October 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.  

The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. 

The Trust invests in private companies. The risk of investing in private companies could be greater as these assets may be more difficult to sell, so changes in their prices may be greater.

This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. 

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